The Hess Group countered Allied Domecq’s bid of $3.85 a share with one of the same amount, and Allied has rather predictably gone to $4.00 per share. The gloves are off indeed in the battle for control of Barossa-based wine producer Peter Lehmann Ltd. The company’s share price has shot past $4.00, which is well above the initial offer of A$3.50 from the Swiss-based Hess Group AG. On one hand, the company has publicly stated that its shareholders should consider all bids put before them and not act immediately on either the Allied or the Hess bid, but on another hand its founder, Peter Lehmann, has been typically vociferous in his opposition to any potential Allied takeover. While in Canada recently he declared that Allied didn’t have ‘the faintest hope’ of taking control of the company, and suggested that the 3500 or so shareholders followed his example by selling around one third of their shares to Hess. As Alan Kohler suggested in Melbourne’s The Age newspaper, it would appear that the board has not exactly been a united one of late. The choice to shareholders is now very clear. If they sell to Allied, which needs 51% of the company to meet the requirements of its bid, there is a risk that the company’s identity might be altered in a significant way. Prior to raising its bid to $4.00 per share, Allied stated it will pay this amount if it gets 90% of the company’s stock, but given that Peter Lehmann had personally retained 10.5%, this was purely academic. A statement recently received from Peter Lehmann (the individual) includes these words: ‘I have been advised that in the original Bidder’s Statement and in the supplementary Bidder’s Statement by Allied Domecq Wines Australia Pty Ltd (‘Allied’) dated 24 September 2003, continuing reference is made to a price of $4.00 per share, which Allied state that they will pay if they get an interest in 90% or more of the PLW shares. THIS IS IMPOSSIBLE FOR ALLIED TO ACHIEVE and I believe that it is highly misleading to the PLW Shareholders.’ As previously stated, Allied has now bid this amount for all shares. If the shareholders sell to the Hess Group, or take Peter Lehmann’s (the individual’s) advice to sell one-third of their shares to Hess, Hess will become the major shareholder with enough ownership to push through its agenda, with which Peter Lehmann (the individual) is very sympathetic. Given the strong loyalty existent between Peter Lehmann (the individual) and the many Barossa-based shareholders, many of whom are vignerons that supply the company, this is perhaps the most likely scenario. To further fuel the anti-Allied sentiment, Peter Lehmann (the individual) has also circulated material amongst the media that would appear to counter the view posed by Allied Domecq spokesperson Jane Mussared that her business had ‘a good track record of leaving local companies to manage themselves’ and that it was ‘very conscious of local wine culture and local management because we realise this is how wine companies operate’. A very detailed article by Lynn Alley in the Wine Spectator Online covers how Allied Domecq purchased Callaway, the largest and best-known winery in the small southern Californian wine region of the Temecula Valley, only to propose a zoning change to permit the development of residential housing on 800 acres of vineyard land currently leased by the winery. Clearly, the gloves are off. The article goes on to describe how Allied began importing fruit from outside the Temecula region as it expanded production, and began marketing itself under the name ‘Callaway Coastal’. This might be of some measure of concern to Peter Lehmann shareholders determined to ensure the company retains its exclusively Barossa heritage. Meantime Hess has been granted approval by the Australian Foreign Investment Review Board takeover bid. Allied has confirmed its interest in making a counter offer and Lehmann’s financial advisors have been holding talks with Allied. Watch this space.
